‘Grave Dancer’ Sam Zell Returns to Haunt Macklowe

It looks like Sam Zell is sticking to what he knows best: hunting for real-estate bargains. His real-estate company is buying three New York apartment buildings from embattled developer Harry Macklowe.

Yes, that Harry Macklowe, the same developer who purchased a slug of Zell’s Equity Office Portfolio for $7 billion at the top of the commercial real-estate market in 2007. The debt on that deal rapidly went into default, making Macklowe a canary in the coal mine of troubled commercial real estate.

In the latest deal, Zell is buying RiverTower, with 323 apartments, and 777 Sixth Avenue, with 294 apartments and Longacre House, with 293 units. The $475 million tag represents a 50% discount to the peak prices that Macklowe paid, according to this WSJ article about the deal.

Zell started managing apartments when he was attending the University of Michigan and began building his real-estate empire only a few years after graduation, buying up $3 billion of distressed real estate after the market crashed in 1973. He earned the nickname “grave dancer” for “dancing on the skeletons of other people’s mistakes,” Zell told an interviewer in 2007.

Of course, Zell may well be remembered more for his top-of-the-credit-market acquisition of Tribune Co. rather than his decades of real-estate bargaining hunting. Less than two years after Zell acquired the media conglomerate, it declared bankruptcy. Zell lost his entire $315 million investment in Tribune, In bankruptcy, senior lenders, such as Deutsche Bank AG and JP Morgan & Co., saw their loans to Tribune cut to $500 million from $8.6 billion.

Perhaps Zell’s latest real estate grave dancing will allow him to forget his own skeletons.